Eastpoint Block A RTM Company Ltd v Otubaga (2022) UKUT 319 (LC)
Eastpoint are a right to manage company for a block of flats. The company had brought proceedings for a determination of breach of lease under s.168(4) Commonhold and Leasehold Reform Act 2002 against Mr Otubaga, one of the lessees, alleging breach of two of the covenants in the lease of his flat by using the premises to conduct a business and by permitting a subtenant to cause nuisance to other tenants and occupiers of the block.
The FTT had dismissed the application on the grounds that it had no jurisdiction. On appeal, the Upper Tribunal upheld that decision. The UT held that only a landlord can bring an application under s.168(4) and an RTM company is not a landlord.
an RTM company would be entitled to ask the court for an injunction, or a declaration that a tenant was in breach of covenant, but those would not be applications under section 168(4) which can only be made to the appropriate tribunal.
Triplerose Ltd v Bowles & Ors (2022) UKUT 214 (LC)
Leaseholders had made an application to the FTT on the reasonableness of service charges. In the course of proceedings, the leaseholders had st out that they challenged a third (33%) of various charges. The FTT had agreed that the charges were not reasonable in amount, and decided that only 50% of those charges were payable.
The landlord appealed and the Upper Tribunal upheld an appeal on this issue. S.27A(4) Landlord and Tenant Act 1985 provided that no application can be made in respect of a matter which ‘has been agreed or admitted by the tenant’. The FTT therefore had no jurisdiction to reduce the charges further than the reduction sought by the leaseholders.
Dell v 89 Holland Park (Management) Ltd (2022) UKUT 169 (LC)
89 Holland Park was the lessee owned freehold company. The company had entered into extensive litigation with the owner of a neighbouring property, a ‘celebrity architect’, Sophie Hicks, about her redevelopment plans for the property.
When the award-winning architect Sophie Hicks planned to build an underground mansion in Holland Park, with a glass cube above ground which would glow at night, she met with stiff opposition from her neighbours. After several rounds of litigation her plans had to be scaled down and to that extent the neighbours were successful. But success has come at a heavy price in terms of litigation and other costs, and this appeal is one of the consequences of that protracted battle.
The costs of that litigation were horrendous.
The cost of the dispute to the respondent has been eye-watering. The summary narrative of events that I set out above does not convey the scale of professional advice and representation that it has had, including expert reports on arboriculture, engineering, heritage and aesthetics, as well as legal representation by solicitors and by leading and junior counsel. By 2021 when the FTT gave its decision the total costs incurred were over £2.7 million. Costs paid or to be paid by Ms Hicks are to be deducted from that figure, but further costs have been incurred since it was calculated; overall the costs to the respondent will have been in the region of £2 million – a salutary reminder that the recovery of costs in litigation may still leave a successful party seriously out of pocket.
89 Holland Park sought to put the costs through the service charge of the leaseholders, giving rise to an individual charge to the appellant lessees of £430,411.50. The appellant lessees challenged the payability of the charge.
The FTT had allowed the charge, holding that two lease clauses would encompass the costs.
i) To employ all such surveyors builders architects engineers tradesmen solicitors accountants or other professional persons as may be necessary or desirable for the proper maintenance safety and administration of the Building.” and
ii) “Without prejudice to the foregoing to do or cause to be done all such works installations acts matters and things as in the reasonable discretion of the Lessor may be considered necessary or advisable for the proper maintenance safety amenity and administration of the Building.”
The Upper Tribunal allowed the lessee’s appeal.
The lease provided in other clauses explicitly for the recovery of legal costs (eg for breach of lease, or enforcing another lessee’s covenant. While the freeholder’s actions in the litigation may well have been out of concern for the structural integrity and safety of the building, clause i) and ii) did not, in their generality, extend to the costs of litigation without some express term, or clarity as to the extent of the landlord’s obligation. It was not the case that the landlord’s obligation extended to the litigation that had taken place.
In addition, following Arnold v Britton (2015) UKSC 36, the Tribunal should not ‘bring within the general words of a service charge clause anything which does not clearly belong there’. IN this instance, it simply didn’t make commercial sense that the parties would have agreed a lease obliging the landlord to undertake and the lessee’s pay for potentially ruinious litigation.
I agree that an obligation in the lease for the landlord to incur and for the respondent to fund costs of this level is implausible. If these costs are part of the service charge then so are the costs of any litigation brought against or by the owner of the garden plot in future; landlord and lessees would have an extraordinary commitment to potentially ruinous costs. The existence of such obligations would not make commercial sense because they would make the lease and freehold unmarketable. It is most unlikely that the original parties intended this, and if they did they would have made express provision. Obligations on this scale cannot be gleaned from a provision that is focused upon the practical maintenance and management of the building. To go back to Lord Neuberger’s words at paragraph 23 of Arnold v Britton, these are not obligations that clearly belong in this clause.
The costs of the litigation were not recoverable under the service charge.
It seems amazing that the Eastgate Block A RTM Company Limited got to the Upper Tribunal. I can only assume they were not being advised by a leasehold solicitor … and had resident directors who did not understand the scope of RTM. Crazy!